Direct written premium in Australia is projected to reach nearly $100 billion by 2026 but it may not necessarily lead to better profitability for general insurers because of pressure from natural catastrophe losses, according to GlobalData.

“The Australian general insurance industry is expected to maintain its positive growth momentum over the next five years driven by strong economic recovery,” Senior Insurance Analyst Shabbir Ansari said.

“The profitability of insurers, however, will remain clouded due to escalating losses from increased frequency of natural calamities and rising medical costs.”

The data and analytics firm estimates direct written premium will grow at a compound annual growth rate of 6.4% from $73.29 billion last year to $99.87 billion in 2026.

Strong economic recovery, increasing vehicle sales, and growing demand for natural catastrophe policies will support the Australian general insurance industry in the next three years.

Personal accident and health insurance is the largest segment in the Australian general insurance industry, accounting for 36.7% of direct written premium last year.

GlobalData says the segment grew 0.7% last year following a 0.2% decline last year and predicts it will achieve compound annual growth rate of 4.5% until 2026.

Personal accident and health policies are mostly sold as riders or additional insurance not covered by the public health insurance system, GlobalData said.

Motor insurance, the second largest segment with a 24.2% share of overall direct written premium, grew 6% last year, fuelled by a 14.5% rise in vehicle sales.

GlobalData projects motor insurance will grow at a compound annual growth rate of 6.4% between last year and 2026.

Property insurance, the third largest based on its 22.3% share of direct written premium, is expected to grow 7.2% on a compound annual growth rate basis. Last year the segment grew 9.5%, driven by the demand for natural catastrophes policies.

“Increased numbers of natural calamities in the last two years, such as hailstorms, bushfire and floods, have prompted insurers to increase the price for these policies,” GlobalData said.

Liability, financial lines, marine, aviation, transit and miscellaneous insurance make up the remaining 16.8% of direct written premium in Australia.